The recent release of the "Department of the Treasury Blueprint for a Modernized Financial Regulatory Structure" report reminded me of my senior thesis on the topic of sustainable management of New England fisheries and the commercial enterprises that harvest them. To capture a limited resource in a highly competitive market, whether fish or investors' dollars, each competitor is looking for an edge. If one country accepts low regulatory standards, others are pressured to do the same in order to help the companies operating under their flag maximize their take. Regulators' concern for the fate of the resource is only relevant in the context of being a necessary factor of production for the industry.
The problem with this regulatory paradigm for financial services is that people are not analogous to fish. The financial services industry exists to serve investors, not the other way around. When the Paulson Blueprint speaks in terms of consumer protection rather than of meeting fiduciary obligations, it is tantamount to the perils of overfishing – if you get too greedy you might wipe out your prey.
See Blaine's Fiduciary Corner column in InvestmentNews to learn more.
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